“What Really Matters in Auction Design?,” Paul Klemperer, 2002

Klemperer’s JEP on auction design in practice. Though the Revenue Equivalence Theorem claims that, with a fixed, non-collusive group of bidders, auctioneer revenue does not depend on the choice of auction, in practice it is not possible to stop either collusion or to force bidders to enter. For instance, if there is a cost to bidding, and bidders perceive one bidder to be stronger, a second-price auction will attain zero revenue, since only one bidder will bid. Many interesting examples of real-life “failed” auctions. Notes that sealed-bid auctions and the Klemperer “Anglo-Dutch” auction have nice properties when it comes to avoiding collusion, though perhaps at some loss of efficiency. Argues that regulators should treat antitrust auction during auctions as serious as antitrust action in “normal markets.”


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